Bond Market Update

Treasuries Climb as Job Growth Revised Lower

• U.S. Treasuries climbed on Wednesday with shorter tenors showing relative strength throughout the day. The 2-yr note began rising shortly after the start, following a quiet night in international economic news. Things were also subdued on the domestic economic front, leaving the focus on a late-morning release of updated nonfarm payroll growth figures from the Bureau of Labor Statistics. Today's release showed that payroll growth between April 2023 and March 2024 was overstated by 818,000, giving the Fed another argument to lower the fed funds rate range. This argument was echoed by the afternoon release of FOMC Minutes from the July meeting, which showed that a "vast majority" of FOMC officials are in favor of a September cut. Treasuries faced some brief pressure as the market received the news from the BLS, but renewed buying interest drove the complex to fresh highs in the late morning, followed by a bit more buying before the close. The advance, which left the 10-yr yield just six basis points above its August low, received additional midday support from today's solid $16 bln 20-yr bond reopening. Crude oil touched its lowest level since mid-January before narrowing its loss while the U.S. Dollar Index fell 0.4% to 101.05.
• Yield Check:
  • 2-yr: -7 bps to 3.92%
  • 3-yr: -7 bps to 3.73%
  • 5-yr: -6 bps to 3.64%
  • 10-yr: -4 bps to 3.78%
  • 30-yr: -2 bps to 4.05%

• News:
  • China Securities Journal speculated that the People's Bank of China could lower the seven-day reverse repurchase rate by up to 20 basis points in Q4.
  • China may permit local governments to buy homes with funds raised through bond sales.
  • South Korea's exports through the first 20 days of August were up 18.5% with chip exports rising 42.5%.
  • Fitch affirmed New Zealand's AA+ rating with a Stable outlook.
  • Hungary expects 2024 domestic growth of about 2%, which would be on the lower end of the previous forecast.
  • Japan's July trade deficit reached JPY760 bln (expected deficit of JPY720 bln; last deficit of JPY820 bln) as imports rose 16.6% yr/yr (expected 14.9%; last 3.2%) and exports grew 10.3% yr/yr (expected 11.4%; last 5.4%).
  • South Korea's July PPI was up 0.3% m/m (last -0.1%), rising 2.6% yr/yr (last 2.5%).
  • Australia's July MI Leading Index was unchanged m/m (last 0.0%).
  • New Zealand's July Credit Card Spending was down 3.8% yr/yr (last -3.1%).
  • U.K.'s July Public Sector Net Borrowing reached GBP2.18 bln (expected GBP500 mln; last GBP12.55 bln).
• Today's Data:
  • The weekly MBA Mortgage Inex fell 10.1% to follow last week's 16.8% increase. The Purchase Index was down 5.2% while the Refinance Index fell 15.2%.
  • Weekly crude oil inventories decreased by 4.65 mln barrels after increasing by 1.36 mln barrels a week ago.
  • $16 bln 20-year Treasury bond auction results (prior 12-auction average):
    • High yield: 4.160% (4.605%).
    • Bid-to-cover: 2.54 (2.62).
    • Indirect bid: 71.0% (70.2%).
    • Direct bid: 19.3% (18.5%).
• Commodities:
  • WTI crude: -1.7% to $71.90/bbl
  • Gold: -0.1% to $2547.30/ozt
  • Copper: +1.0% to $4.19/lb
• Currencies:
  • EUR/USD: +0.3% to 1.1158
  • GBP/USD: +0.5% to 1.3099
  • USD/CNH: +0.1% to 7.1231
  • USD/JPY: -0.2% to 144.83
• The Day Ahead:
  • 8:30 ET: Weekly Initial Claims (Briefing.com consensus 225,000; prior 227,000) and Continuing Claims (prior 1.864 mln)
  • 10:00 ET: July Existing Home Sales (Briefing.com consensus 3.90 mln; prior 3.89 mln)
  • 10:30 ET: Weekly natural gas inventories (prior -6 bcf)